Tax cuts are on the table - but why?

Andrew S. Ross

Published 4:00 am, Friday, September 18, 2009

It's clear that any notion of raising certain taxes, or looking for new sources of tax revenue for our cash-strapped, tarnished state, is completely off the agenda. Rather, cutting taxes seems to be the way to go, at least according to gubernatorial candidates who spoke on the matter at the Silicon Valley Leadership Group gathering this week. The magic formula, explained by Insurance Commissioner Steve Poizner, goes like this: Lower taxes = job creation = economic growth = more money in our pockets = increased tax revenue.

While awaiting the opportunity to trust but verify, perhaps those 35,000 business owners who didn't file tax returns for 2007 could step up to the plate. That's the number, including at least 4,000 Bay Area delinquents, being told this week by the state Franchise Tax Boardthat it's time to make good. Similar taps on the shoulder resulted in $31 million clawed back into the state's treasury last year.

That, sadly, is a far cry from the estimated $6.5 billion gap between overall taxes owed and taxes paid every year. Gov. Arnold Schwarzeneggerhas had little to say on this particular issue. Perhaps those who would succeed him might take it more seriously.

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Naming names: Laws prohibit the state identifying any of the 2007 miscreants, but we do know the names of the state's biggest sales tax scofflaws. Like Vacaville Ford Mercury Inc., which owes more than $1.5 million, according to the state Board of Equalization. It's one of Northern California's "top 250 sales tax debtors," according to the board. The bigger money is down south, primarily owed, like Vacaville Ford, by auto showrooms.

Proof of the pudding? Meanwhile, 98,000 Santa Clara County homeowners were told this week their property taxes are being reduced on account of a $19.3 billion reduction in the county's assessment roll, due to Great Recession-induced declines in property values. Presumably, under the magic tax cuts = tax revenue formulation, this should do wonders for the county's coffers and enhance its ability to provide services.

Bandwagon jumping: Speaking of gubernatorial candidates, Attorney General Jerry Brownannounced Thursday an investigation into whether the role played by the credit rating agencies in the financial meltdown - Moody's Investors Services, Standard & Poor's and Fitch Ratings (40 percent owned by The Chronicle's parent, the Hearst Corp.) - broke state consumer protection and unfair business practices laws.

He's a little late to the party. Connecticut's A.G. filed suit back in July, the same month that CalPERS, the nation's largest public pension fund, filed its own. In June, the three agencies settled out of court with New York's A.G. The Justice Department launched its own investigation in March.

Still, better late than never. Armed with subpoenas, Brown is now in a position to join others in asking if the agencies should have known the triple-A ratings they were willy-nilly stamping on subprime mortgage-backed securities and the like were akin to handing out toxic candy.

And whether the enormous fees they were getting from the various purveyors of such instruments of financial mass destruction constituted some sort of quid pro quo.

Be interesting to see what he turns up before March's filing deadline to formally enter the governor's race.